Wal-Mart de Mexico ((WMMVY)) has held its Q1 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Wal-Mart de Mexico revealed a mixed performance, highlighting significant achievements in e-commerce growth and new business development, alongside challenges such as declining transaction volumes and increased expenses affecting profitability. Despite these hurdles, the company expressed optimism about future improvements and growth opportunities.
E-commerce Growth
The e-commerce segment of Wal-Mart de Mexico showed a robust 17% growth during the quarter. Notably, on-demand services surged by 26%, while the marketplace saw an 8% increase, despite a slowdown in key categories impacting its growth.
New Store Openings
In a strategic move to enhance market presence, Wal-Mart de Mexico opened 20 new stores in Q1 2025, marking a 67% increase compared to the same period last year. This expansion contributed 1.6% to the overall sales growth.
Growth in Central America
Central America emerged as a strong performer with a 1.9% same-store sales growth and an impressive 54% increase in e-commerce activities. Additionally, Walmart Connect revenue in the region soared by 69%.
New Business Development
The company’s new business initiatives, such as Bait, gained traction with 19.8 million active users, generating MXN 2.3 billion in revenue. Walmart Connect also experienced a 25% growth, underscoring the success of these ventures.
Gross Margin Expansion
Wal-Mart de Mexico achieved a gross margin expansion of 20 basis points to 24.1%, driven by contributions from new businesses and improved price perception, reinforcing its competitive edge.
Price Leadership
Efforts to bolster price leadership yielded positive results, with campaigns like Morralla contributing to double-digit growth, demonstrating the company’s commitment to offering value to its customers.
Negative Same-Store Sales Growth in Transactions
Despite a 4.6% growth in ticket size, same-store sales transactions declined by 3.2%, indicating challenges in maintaining customer footfall.
Decline in Gaming and Electronics Categories
The marketplace growth was hindered by an industry-wide slowdown in key categories such as video games, TVs, and video, affecting overall performance.
SG&A Expense Increase
SG&A expenses rose by 12%, accounting for 16.5% of revenues, with a notable 70 basis points expansion in Mexico, highlighting the need for cost management.
Inventory Growth
Inventory levels increased by 15%, surpassing sales growth, which underscores the necessity for enhanced inventory management strategies.
Operating Income and EBITDA Margin Contraction
Operating income saw a 1.5% decline, and the EBITDA margin contracted by 50 basis points to 10.4%, reflecting the impact of rising expenses on profitability.
Forward-Looking Guidance
Looking ahead, Wal-Mart de Mexico maintains an optimistic outlook with a projected annual sales growth of 6% to 7%. Despite current challenges, the company anticipates a gradual ramp-up in consumption and continues to focus on strategic expansions and e-commerce penetration.
In summary, the earnings call for Wal-Mart de Mexico highlighted a balanced narrative of achievements and challenges. While the company faces hurdles in transaction volumes and expense management, its strong e-commerce growth, new store openings, and strategic initiatives position it well for future growth. The overall sentiment remains optimistic, with a focus on leveraging growth opportunities in the coming quarters.